Correlation Between Jennison Natural and Mfs Technology

Can any of the company-specific risk be diversified away by investing in both Jennison Natural and Mfs Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Jennison Natural and Mfs Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jennison Natural Resources and Mfs Technology Fund, you can compare the effects of market volatilities on Jennison Natural and Mfs Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Jennison Natural with a short position of Mfs Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jennison Natural and Mfs Technology.

Diversification Opportunities for Jennison Natural and Mfs Technology

-0.04

Correlation Coefficient

Jennison Natural  Mfs Technology

Good diversification

The 3 months correlation between Jennison and Mfs is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Jennison Natural Resources and Mfs Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Technology and Jennison Natural is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Jennison Natural Resources are associated (or correlated) with Mfs Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Technology has no effect on the direction of Jennison Natural i.e., Jennison Natural and Mfs Technology go up and down completely randomly.

Pair Corralation between Jennison Natural and Mfs Technology

Assuming the 90 days horizon Jennison Natural is expected to generate 18.21 times less return on investment than Mfs Technology. But when comparing it to its historical volatility, Jennison Natural Resources is 1.05 times less risky than Mfs Technology. It trades about 0.01 of its potential returns per unit of risk. Mfs Technology Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,849  in Mfs Technology Fund on September 18, 2024 and sell it today you would earn a total of  2,631  from holding Mfs Technology Fund or generate 92.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Jennison Natural Resources  vs.  Mfs Technology Fund

Jennison Natural Res

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jennison Natural Resources has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Jennison Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Technology Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Mfs Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jennison Natural and Mfs Technology

The main advantage of trading using opposite Jennison Natural and Mfs Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jennison Natural position performs unexpectedly, Mfs Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Mfs Technology will offset losses from the drop in Mfs Technology's long position.

The idea behind Jennison Natural Resources and Mfs Technology Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.